Go CPO
Certified preowned-car warranties provide peace of mind because factory warranties are backing the product, but Anderson says there's another crucial factor: manufacturer vetting. CPO cars have to be in good to great shape to be insurable. "The only way [car companies] can offer CPO is because they're making money on the aggregate of the warranties. If they weren't, the business model wouldn't make any sense."
Like any insurer, carmakers want to insure mostly healthy patients. But unlike health insurance providers, car companies can inspect every patient top to bottom to make sure it's healthy. They'll do small repairs to prep a CPO for sale, but any vehicle that needs major work, such as a new transmission, will never make it into the certified preowned pool.
The upshot: A CPO car is already a good machine or the carmaker would never sell it as such. That puts the dealer in a position where he doesn't feel like he has to hide anything from you.
Shopping for CPOs
But just as new-car warranties differ, not all CPO warranties are created equal. When you're shopping for one, Anderson says, look first at the deductibles. Audi charges $85, BMW $50, and Land Rover $100, none of which may surprise you (though neither Mercedes or Lexus charges a deductible). But it is a shocker that Chrysler charges $150 and Ford $100.
Also, check whether the CPO warranty is transferable if the car is sold prior to its expiration, which could apply to you if you're the buyer or the seller. Audi, Infiniti/Nissan, and Lexus all say no, but Kia will let you transfer a warranty, though it charges $40.
There's a ton of fine print that comes with CPO warranties. Read it—the details should be on the manufacturers' websites. The information within covers a lot of ground. Can you finance a CPO car? Can you lease a CPO car? Is roadside assistance included? Look for deal-breakers. There's no such thing as perfection; it just depends on where you're willing to bend and where you're not.
The biggest question, however, is the obvious one: how much coverage you're going to get and for how long. Lexus offers three-years/100,000 miles, which is one of the best CPO warranties around. It compares favorably witih other programs that offer anywhere from three months comprehensive/12 months powertrain to 24 months comprehensive coverage.
To Extend the CPO Warranty or Not?
Before you buy a certified preowned car, you should investigate not only the warranty details, but also whether you can buy an extended warranty.
This is especially true for a luxury car, and even more so if the CPO contract covers only a year or two. Luxury cars are typically expensive to maintain and the extra warranty protection is nearly always a wise play. However, Anderson says, extended warranties are becoming an increasingly smart move even for other vehicles. "Think of Ford's Sync or any other sophisticated electronic system," he says. When it goes south, it requires a great deal of troubleshooting. "Often the parts are cheap, but it takes them a long time to figure out why something isn't working, and at $85 or $120 an hour, that labor adds up quickly."
But (you knew there was a but, right?), not all extended warranties are necessarily worth it. Audi doesn't even offer one, nor does Porsche or Mini, and even if you can get one you still need to look at the limitations. For instance, you might find an extended warranty that covers up to five years, but ends at 74,000 miles. If you're buying a car with 60,000 miles on it already, that extended warranty isn't much good.
Finally, a little secret of the extended warranty game is that they cost the dealer a set amount. How much isn't public knowledge and carmakers won't share that information, but dealers are free to use it as a bargaining chip. They can throw it in with the purchase price of a CPO car or non-CPO car; they can charge more than it costs them. The point is that it's negotiable, so you should feel free to ask for the time to study what the warranty covers and what it doesn't, and haggle over the price.
Don't Fear if You Don't Buy CPO
Sometimes a certified preowned car isn't an option. What if you inherit a car, buy one from a neighbor or a friend, or buy an ordinary, non-CPO used car? You can still get coverage by purchasing a factory extended warranty from a dealer, or an aftermarket warranty. While the latter idea scares many customers, probably because of a belief that the factory warranty is "better," the truth is that most factory warranties are serviced by the same companies that sell aftermarket warranties. Remember: It's all insurance. Carmakers don't really want to be in the insurance business, they want to be in the car business. So they negotiate contracts with giant companies that provide insurance in the form of warranties.
Both
JM&A and
EasyCare provide both aftermarket insurance to dealers and new/used-car insurance to dealers and manufacturers. EasyCare lets you buy insurance directly from them, while JM&A processes most of its sales directly through dealers.
Do your homework when scouting an aftermarket warranty—and be cautious. Anderson says he's rated the warranties from companies like JM&A and EasyCare because they're safe for consumers and have a long legacy in business. But IntelliChoice actually stopped even bothering to rate the products from a slew of other firms that seemed to come and go every year.
He suggests asking for a referral to a BBB rating and even finding out what dealers or car manufacturers the insurance companies work with. If you're on the phone shopping for a quote, the salesperson ought to be able to steer you to that information easily—it's a red flag if she or he can't. The same goes for the shopping experience at the dealer. They may not know off hand about every company, but they should certainly be able to provide you with paperwork so you can do this legwork yourself.
Pimp Your Ride, Void Your Warranty
It's fine to be a tinkerer, and if you're changing your own tires, air filter, or oil, that's usually fine. But if you're doing performance modifications on your used car, then be warned: You're almost surely voiding your base, CPO, or extended coverage. That should be a no-brainer, but it's yet another reason to ask lots of questions before you buy any coverage—you should be able to find out what basic service you can do on your own car without endangering the warranty. "Dealers aren't looking for reasons to deny you coverage," Anderson says, since they're going to get reimbursed for whatever work they do on your car. But they have to protect their own liability. If you put a turbo on your Civic, then you can bet any drivetrain coverage you had went up in smoke.
The Bottom Line
Messy, right? There are some simple rules to follow. Namely: The best plan B for those of us who can't afford driving new is to drive CPO. It's a safer bet at least than driving a car with no warranty of any kind. And don't be afraid of an aftermarket warranty—it you buy it from a legit company with a long record.
But there's no default answer to cover every possible car and situation, so do your homework—and know yourself. Weigh what you owe on the car and its potential resale value; then consider whether you can afford to drop multiple thousands of dollars on a new engine or a replacement transmission, or whether the hedge of an extended warranty (which could cost you somewhere between $600 and $2000) is a smarter gamble.
Plus, doing all this math will give you a much better idea of the value of your car and how much
you value peace of mind. This is why the risk averse lease, or at least sell once the manufacturer's warranty has expired.
